Tax Increases and Spending Cuts in Italy Will Slow Growth, Not Speed It Up

Wednesday, 21 September 2011 05:08

In an article discussing debt problems of euro zone countries the NYT told readers that a statement issued by the Italian government yesterday:

"said the government was preparing steps to lift growth and recently passed measures to control public finances through tax increases and spending cuts."

It would have been appropriate to remind readers that spending cuts and tax increases slow growth by pulling money out of the economy. It is likely that whatever steps the Italian government might prepare to boost growth will be more than offset by the impact of its austerity package.